October 14, 2009

In Health Debate, Democrats Call on Justice Department

The U.S. Department of Justice has stepped into the battle over health care, giving ammunition to congressional Democrats who want to shake up the health insurance market.

The department made its foray today during a Senate hearing about the federal antitrust exemption that health insurers have enjoyed for more than 60 years. Democrats say a repeal of that exemption would help consumers by allowing the Justice Department to police potentially anti-competitive practices, such as market allocation and bid rigging, that are currently left up to state insurance regulators. And the department suggested today that it generally agrees.

The repeal proposal comes up, in a not-so-subtle way, as some Democrats are trying to persuade the insurance industry to accept a new public insurance plan. “It puts in perspective, for those of us who want a public option, that there has to be competition,” said Sen. Dick Durbin (D-Ill.), the No. 2 Senate Democrat.

The Democrats’ lead witness on the issue: Christine Varney, assistant attorney general for the Antitrust Division. Though the Justice Department hasn’t taken a position on a specific bill about the insurers’ exemption, Varney gave the proposal a boost this morning. “I don’t think that the reasons that were in existence in 1945 are still very viable for this exemption,” she said.

Varney, a former partner at Hogan & Hartson, testified about three decades’ worth of studies that say the exemption is outdated.

Sen. Orrin Hatch (R-Utah) said a repeal of the exemption would lead to smaller and fewer insurers. “I have, as yet, seen little evidence to justify a complete repeal,” he said.

Congress created the antitrust exemption in the McCarran-Ferguson Act of 1945. Insurers say it’s still needed to allow for the sharing of industry data — a point that Varney disputed, saying that data-sharing is frequently legal as long as it meets Justice Department guidelines.

“Repealing the McCarran-Ferguson Act would allow competition to have a greater role in reforming health and medical malpractice insurance markets than would otherwise be the case,” Varney said.

She added that, if Congress gave her the authority to prosecute in the health insurance market, she would still rely on the guidance of state authorities. And, she said, the Justice Department should be able to take into account the “rule of reason” and other flexible standards before acting against a health insurer. Click here (PDF) for a copy of her prepared testimony.